Palestinian Authority struggles to pay public employees Occupied West Bank News

Ramallah, Occupied West Bank – After years of economic downturn, occupied West Bank authorities say they are struggling to pay public workers’ salaries as rising inflation, reduced donor support and Israel’s withholding of essential tax collection drown the already crippled Palestinian Authority (PA) budget.

“The conditions we are living in are difficult, we are in a financial deficit,” Prime Minister Mohammad Shtayyeh admitted this week, telling reporters that the PA has not received any aid to pay salaries, worth 920 million Israeli shekels ($ 292 million) a month. ).

Financial crisis – describe officials and analysts have called it “the worst” since the PA was formed in 1993.

“It simply came to our notice then. We were then told that we could get a permanent 25 percent deduction from our salaries. After that, they said the 25 percent deduction would only last for a few months, ”a PA public official told Al Jazeera anonymously.

“So far no one was able to send in the perfect solution, which is not strange.”

Like economies around the world, Palestine is currently struggling with high inflation caused by supply chain announcements and raw material shortages, while nations are rejecting coronavirus restrictions.

PA tax revenue discard shortly after the start of the pandemic, they reached their lowest level in 20 years, which only exacerbated long-standing financial challenges.

Although foreign donor support has waned over the years, the biggest blow came in 2017, when former U.S. President Donald Trump cut off almost all U.S. aid to the Palestinians. Although Trump’s successor, Joe Biden, has reopened some sources of funding, U.S. law now prohibits direct support for the PA.

In November, planning and aid coordination consultant Estephan Salameh Shtayyeh told local media that the crisis could last six months before the expected European Union aid of 600 million euros ($ 680 million) reached in March.

World Bank Report of 17 November (PDF) The PA deficit is expected to reach $ 1.69 billion by the end of the year, and donor support is projected to be “$ 184 million, 38 percent of what is received by 2020.”

“The efforts of all parties are crucial to prevent a crisis without additional funding, as by the end of the year the PA may find it difficult to meet its recurring commitments,” the report warns.

In September, Israel said it had lent the PA 500 million shekels ($ 155 million) to repay it in June 2022, “to prevent its collapse,” according to Israeli media.

Old solutions are not an option

Ramallah economic analyst Jaafar Sadaqa said there was great uncertainty over whether a long-term solution would be found.

In previous financial crises, Sadaqa said, donor countries “would be in a hurry to pay the necessary amounts and would often increase financial assistance to the PA.”

Things are different now, though.

In October, before embarking on a European tour aimed at raising political and financial support, Shtayyeh said in a special session of the Palestinian Authority that foreign aid had fallen by 90% this year. The reduction in international aid has left the PA with a $ 704 million funding gap in the first eight months of 2021, according to the World Bank, at 10 percent of its basic budget funding last year.

And this time, observers say, even the PA will not be able to borrow to get out of the predicament.

“In the past, the PA also considered taking out loans from banks and returning them when the crisis was over. However, the banks are not ready to lend to the PA because it has no collateral, ”Sadaq said.

PA’s debt to local banks was $ 2.5 billion in August 2021. Internal bank borrowing, on the other hand, exceeds the limit set by the Palestinian Monetary Authority (WFP), “eliminating this funding opportunity in the future,” according to the World Bank.

At a press conference this week, Shtayyeh also warned that the PA “may not be able to borrow from banks” this month. “We hope to meet our needs in the coming days,” he added.

Israel adds to the problems of the PA

Adding to the PA’s ills is a significant drop in tax revenues – another pillar of its budget – because Israel has routinely refused to transfer “a portion of its revenue.”

The funds – including taxes collected by Israel on behalf of the PA – include customs duties more than 60 percent Among the PA’s annual revenue.

Under the economic agreement known as the 1994 Paris Protocol between Israel and the PA, these funds will be transferred to the PA on a monthly basis. But Israel has often turned these funds into a political bargaining chip, refusing to hand over all or part of the money until the PA has bowed to its will.

In January and June 2021, Israel withdrew 50 million shekels ($ 16 million) per month from the cleansing funds, citing AP grants for Palestinian prisoners and the families of those killed by Israel. In July, Israel raised its monthly deductions to 100 million shekels ($ 32 million).

“These monthly deductions put a lot of strain on the Palestinian fiscal situation,” says the World Bank.

In addition to the financial armament of tax revenue, the PA also has to deal with the many fiscal spills and structural problems caused by the Israeli occupation.

The United Nations Conference on Trade and Development (UNCTAD) said in a report (PDF)Since the Second Palestinian Intifada or uprising in 2000 last week, the occupation has cost the West Bank Palestinian economy $ 57.7 billion in closures, cuts and military operations.

“Israel has put in place a complex system of mobility restrictions that has turned the West Bank into an isolated island. These measures halted economic activity, led to severe dislocations and large revenue losses, and thus exacerbated vulnerabilities and vulnerabilities in advance and in depth, ”the report said.

“They have long-term consequences, including volatile economic growth, persistently high unemployment and poverty rates, and chronic internal and external deficits.”

The Israeli occupation effectively isolates Palestinians from international markets, making Israel highly dependent on trade. Last year, Israel accounted for 80% of Palestinian exports and 58% of imports, according to UN figures.

In U.S. dollars, Israeli Palestinian imports last year were worth $ 2.75 billion and exports were less than $ 1 billion, according to the U.S. Department of Commerce.

‘Not enough anymore’

As the AP tries to get out of the fiscal squeeze, lower-income public sector workers are struggling to keep food on the table.

A PA official, who also spoke on condition of anonymity with Al Jazeera, said rising food prices were making it increasingly difficult to feed a family of eight with their fixed income, which has not adjusted for inflation.

The sole promoter of his home, a public official said he could afford to buy five chickens a week to support his family. Now he can only afford three. And the prices of other products, such as sugar, rice and flour, are also rising.

“After a significant rise in prices, there is now an unforeseen or unrecognized additional expense, which has added an additional burden to our family,” he said.

Ibrahim al-Qady, head of the Consumer Protection Agency attached to the PA’s Ministry of Economy, told Al Jazeera that there had been fears about rising prices.

“The price increase has affected Palestine like any other country in the world,” he said, adding that his agency has stepped up its market surveillance to ensure that there is no price increase.

But for those struggling with stagnant income and rising prices, the future is bleak.

“We are afraid that prices will continue to rise,” Mujahed al-Assa, who owns a clothing store in Bethlehem, told Al Jazeera.

The 32-year-old said he had reduced his sugar purchases but was worried that inflation would worsen, making life difficult for his small family as his income was “no longer enough to cover the expenses and needs of the house for a whole month”.